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Transportation Brief: Prop 22’s Impact on the Transportation Industry

by Shannon M. Cohen, Gregory M. Feary, Christopher C. McNatt Jr.

November 2, 2020

The gig economy – spearheaded and underwritten by major gig economy companies such as Uber, Lyft, and Doordash – has launched a high-profile campaign to prevent the application of California’s AB 5 law (and the ABC test it dictates) to determine a worker’s employee status. By putting the question before California voters as Proposition 22 (Prop 22), proponents of this voter referendum hope to carve out a new “dependent contractor” status.

Prop 22 will appear on the ballot this November, writing yet another chapter of the independent contractor (IC) saga in California. Prop 22 establishes that gig economy drivers will be deemed to be ICs, but also provides certain guaranteed benefits and protections that would not be available to a traditional IC. For example, Prop 22 guarantees drivers minimum earnings (based off of 120% of the local minimum wage), full payment of tips, per-mile compensation for the use of the vehicle, a healthcare subsidy based on the average weekly amount of hours of “engaged time” a driver performs above a set minimum, and occupational accident coverage.
Not to be left behind, California state courts have also waded into the dispute, with at least one judge ruling that Uber and Lyft must treat their drivers as employees pursuant to the ABC test under current law while a lawsuit challenging the drivers’ IC status proceeds. Because the trial court order requiring the use of employees was stayed by the appellate court, Uber and Lyft are not required to transition to an employment model unless Prop 22 fails and the case is ultimately decided against Uber and Lyft.

Prop 22 directly impacts only those companies that use online applications or platforms to facilitate on-demand services using private passenger vehicles (e.g., core gig-economy companies such as Uber, Lyft, and Doordash). While a favorable outcome for Prop 22 helps support the general objection to the ABC test as expressed in AB 5, it will not have a direct impact on the greater transportation industry. Even more narrowly, a decision in the Uber and Lyft employment case requiring those companies to treat drivers as employees will emphasize California courts’ tendency in transportation gig economy fact patterns, but will not be directly transferable to the larger transportation industry as controlling precedent.

 


Scopelitis’ Transportation Brief® is intended as a report to our clients and friends on developments affecting the transportation industry. The published material does not constitute an exhaustive legal study and should not be regarded or relied upon as individual legal advice or opinion.
 
 
 
 
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